Although the anonymity surrounding Internet transactions has drawn increased attention to the problem of identity fraud, its scope is by no means limited to this area: indeed, its history long pre-dates the world of electronic communications. Identity fraud, also known as identity theft, occurs, for example, when a malefactor fraudulently assumes the identity of a victim in order to secure a dishonest advantage. It may involve assumption of the identity of an innocent living person, a dead person, or even (when the intention is to conceal true identity) a wholly fictitious person. One well-established ploy is to use false or stolen documents. With the advent of electronic communications, the production of forged devices (e.g., cards) or misappropriated information (e.g., passwords) will serve the same end.
Identity fraud presupposes a situation in which the parties to a transaction do not know one another, and one party (the “relying party”) seeks to verify the identity of the other. To date, solutions to the problem have followed three main routes.
The first solution involves the production of identifying evidence. Examples of such evidence are birth certificate, bank statements, utility bills and similar documents. Their evidential weight relies on the fact that it is generally difficult to assemble a collection of such evidence unless it is already legitimately in the individual's possession. However, an impostor may obtain such evidence by means such as theft and forgery.
The second solution involves what we might call “certification.” According to this model, the individual acquires a certificate of identity by applying to an authority with evidence of his identity. The authority checks the evidence and, if satisfied, issues a certificate. One time-honoured example of this approach has been the issuance of passports. In this case, the certificate is the passport. In order to acquire a passport, the applicant has to obtain photographs and present them in person to a reputable member of the community (the authority in this case) who either knows the applicant or who is able to assess the veracity of evidence produced by him. If satisfied, the authority signs the photographs. Trusting the authority, the passport office then issues the certificate bearing one of the photographs.
The second solution may be seen as a special case of the first. The evidence appears stronger, because the evidence has been subjected to impartial scrutiny by a trusted authority; and typically the certificate is more closely bound to the certified individual, by means of a handwritten signature, a photograph, a secret PIN or similar means.
The third solution, which we will refer to as the “coherence” solution, is a relatively recent development. Here, identifying information volunteered by the individual is compared with a number of large databases containing identifying information. This approach, which is proposed by U.S. Pat. No. 6,871,287 to Ellingson and U.S. Patent Application Publication No. 20050165667 to Cox, relies upon the fact that in modern times, individuals interact with many institutions that build up records of identifying information. Credit records, health records, the electoral register, census returns and other large databases provide a wealth of collateral information that can be used to check identity.
All three approaches have significant drawbacks. In the case of the first and second approaches, as has already been mentioned, theft and forgery are all too possible. In addition, they both impose upon the individual the burden of carrying proofs of identity. In the third approach, it is possible for the malefactor to obtain access to databases of identifying information and so make a convincing, though fraudulent, claim. This is particularly a problem where “insiders” are party to fraud, for example call centre staff or bank employees (see, e.g. Data Security Chief arrested for Account Hacking at http://www.finextra.com/fullstory.asp?id=14133).
The weakness that all three solutions have in common is that they tend to concentrate risk by seeking impersonal guarantors of identity—documents, certificates or a plurality of databases. To put it simply, they rely upon touchstones or criteria of identity that are all too easily identifiable by the impostor, who can therefore direct his resources to counterfeiting similar touchstones or satisfying the criteria. They may make it difficult, but the impostor knows exactly what he must do in order to circumvent the safeguards.